Tonight, President Obama plans to announce some budget outlines in his State of the Union address. One of those goals will be to make a college education all but unaffordable to anyone but the wealthy. He won’t use those words, of course. But it puts the lie to the copycat “analysis” of the president’s cruel budget that he is somehow playing Robin Hood by taking from the rich to give to the poor. Though I generally don’t mind any analogy that correctly paints confiscatory taxes in the service of crony capitalism as theft, in this case the truth is that Robin Hood would be a vast improvement.
The court stenographers at the Washington Post played along over the weekend, “reporting” on Obama’s State of the Union proposals by parroting talking points. The lede: “President Obama plans to propose raising $320 billion over the next 10 years in new taxes targeting wealthy individuals and big financial institutions to pay for new programs designed to help lower- and middle-income families, senior administration officials said Saturday.”
As is generally the case with this administration, the actual reporting had to be done by those outside the mainstream press. Ryan Ellis at Americans for Tax Reform explained five different tax increases sought by the president. And surprise, surprise–they don’t all target those who make up the richest of the rich and are therefore the Democrats’ cash piñatas.
The taxes include an increase in the death tax, proving that Democrats still adhere to Miracle Max’s advice that the only thing to be done with a man who is “all dead” is to “go through his clothes and look for loose change.” It will also include a bank tax that will be passed along to the bank’s customers, as well as a new tax on retirement savings. But the worst among them is probably the tax on education. (Morally speaking, the death tax is probably the “worst,” since organized grave robbing is generally frowned upon in the civilized world. The education taxes are the “worst” from the standpoint of their dishonesty and their burden on those least able to shoulder it.)
Here’s Ellis:
Under current law, 529 plans work like Roth IRAs: you put money in, and the money grows tax-free for college. Distributions are tax-free provided they are to pay for college.
Under the Obama plan, earnings growth in a 529 plan would no longer be tax-free. Instead, earnings would face taxation upon withdrawal, even if the withdrawal is to pay for college. This was the law prior to 2001.
This is remarkably grotesque policymaking, because of how it builds on the Obama administration’s general attitude toward paying for higher education. The federal student loan bubble has artificially inflated the cost of tuition. It doesn’t lower college costs, it merely defers them after increasing them. The government’s approach to paying for college is a loan racket that sees young people taking on mountains of debt to pay for the salaries of administrators and tenured professors.
The goal is not education, either, as much as it is about selling a piece of paper that has become a prerequisite for participation in much of the economy. In other words, while students are being sent to college ostensibly to get an education, the government sees it as a licensing scheme. If and when the bubble bursts, taxpayers will be on the hook for the inevitable bailout.
So it’s already an immoral status quo, held up and protected by liberal establishment politicians, like Obama. But Obama’s tax plan would make the system even less fair. Thanks to the government’s role in ballooning tuition costs, college savings accounts can be crucial to anyone who doesn’t have the disposable income to toss off tens of thousands of dollars a year per student.
So what does Obama do? He attacks the last bastion of college affordability, the savings account. In a follow-up piece at Forbes, Ellis notes that the tax change that made college savings accounts more advantageous were part of George W. Bush’s tax relief for the middle class. Ellis writes:
The 2001 tax law change which the Obama budget repeals resulted in an explosion of mass participation in 529 plans. According to the College Savings Network, taxpayers responded to the changes virtually overnight. Assets in 529 plans doubled from 2001 to 2002 (from $13 billion to $26 billion) and began their fast march to the quarter-trillion dollar level we see today. The total number of accounts grew from 2.4 million in 2001 to 4.4 million just a year later in 2002. There’s every reason to believe that taxpayers will snap back almost as quickly.
The good news is that Obama’s financial abuse of the middle class and poor has to pass Congress (at least until Obama discovers executive authority for that too). Congress is in the hands of the Republicans, but even many Democrats will balk at further blurring the boundaries between the modern welfare state and an organized crime syndicate. But it does give the country a glimpse into the cruelty awaiting them if Congress weren’t standing in the way.
